A leading business and financial adviser is warning many of Scotland’s employers aren’t prepared for sweeping changes to ‘Salary Sacrifice’ due to come into effect in April 2017.
Grant Thornton is urging businesses to act now and – if required – seek assistance, to avoid leaving employees unsure of what benefits they are entitled to and potentially any additional costs they may accrue.
The Chancellor formally announced changes to the Salary Sacrifice system in his November Autumn Statement, effectively scrapping most of the arrangements currently in place. The current system enables staff members to give up part of their salary in return for benefits-in-kind, ranging from dental insurance to bicycle hire. The scheme essentially enables people to bypass certain tax and National Insurance payments, meaning ‘perks’ such as insurance and childcare can be substantially cheaper.
Estimates suggest Salary Sacrifice has been costing the UK Government more than £15 billion a year, prompting the changes announced last year. The move means that from April 2017, employers will need to ensure that staff are fully aware of what benefits they are and aren’t entitled to.
Monica Houston, Tax Manager at Grant Thornton in Scotland, said:
“The end of Salary Sacrifice was widely predicted, but it doesn’t mean it’s impact won’t be felt by many employers and employees throughout Scotland. The good news is that some of the most popular benefits will still be available such as pensions, including pension advice, and childcare.
Arrangements in place before April 2017 for certain benefits will also be protected but employees need to assess their position now to see what impact the changes will undoubtedly have on their net cash position.
Companies should familiarise themselves with what is and isn’t affected as soon as possible. Communicating exactly what this action means and taking steps to minimise disruption are essential if employers want to do their bit to avoid staff being left out of pocket.”